TAXATION LAW II

A.Y. 2018-2019

CASE TITLE: UNGAB VS. CUSI, JR

G.R. NO/DATE: GR NOS. L-41919-24. MAY 30, 1980
An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to
defeat and evade the income tax. A crime is complete when the violator has knowingly and
willfuly filed a fraudulent return with intent to evade and defeat the tax. The perpetration of
DOCTRINE: the crime is grounded upon knowledge on the part of the taxpayer that he has made an
inaccurate return, and the government's failure to discover the error and promptly to assess
has no connections with the commission of the crime.

FACTS:

In July, 1974, BIR Examiner Ben Garcia examined the income tax returns filed by the herein petitioner,
Quirico P. Ungab, for the calendar year ending December 31, 1973. In the course of his examination,
he discovered that the petitioner failed to report his income derived from sales of banana saplings.
As a result, the BIR District Revenue Officer at Davao City sent a "Notice of Taxpayer" to the petitioner
informing him that there is due from him (petitioner) the amount of P104,980.81, representing income,
business tax and forest charges for the year 1973 and inviting petitioner to an informal conference
where the petitioner, duly assisted by counsel, may present his objections to the findings of the BIR
Examiner. 1 Upon receipt of the notice, the petitioner wrote the BIR District Revenue Officer protesting
the assessment, claiming that he was only a dealer or agent on commission basis in the banana
sapling business and that his income, as reported in his income tax returns for the said year, was
accurately stated. BIR Examiner Ben Garcia, however, was fully convinced that the petitioner had
filed a fraudulent income tax return so that he submitted a "Fraud Referral Report," to the Tax Fraud
Unit of the Bureau of Internal Revenue. After examining the records of the case, the Special
Investigation Division of the Bureau of Internal Revenue found sufficient proof that the herein
petitioner is guilty of tax evasion for the taxable year 1973 and recommended his prosecution:

(1) For having filed a false or fraudulent income tax return for 1973 with intent to evade his
just taxes due the government under Section 45 in relation to Section 72 of the National
Internal Revenue Code;

(2) For failure to pay a fixed annual tax of P50.00 a year in 1973 and 1974, or a total of
unpaid fixed taxes of P100.00 plus penalties of 175.00 or a total of P175.00, in accordance
with Section 183 of the National Internal Revenue Code;

(3) For failure to pay the 7% percentage tax, as a producer of banana poles or saplings,
on the total sales of P129,580.35 to the Davao Fruit Corporation, depriving thereby the
government of its due revenue in the amount of P15,872.59, inclusive of surcharge.

In a second indorsement to the Chief of the Prosecution Division, dated December 12, 1974, the
Commissioner of Internal Revenue approved the prosecution of the petitioner.

Thereafter, State Prosecutor Jesus Acebes who had been designated to assist all Provincial and City
Fiscals throughout the Philippines in the investigation and prosecution, if the evidence warrants, of all
violations of the National Internal Revenue Code, as amended, and other related laws, in Administrative
Order No. 116 dated December 5, 1974, and to whom the case was assigned, conducted a preliminary
investigation of the case, and finding probable cause, filed six (6) informations against the petitioner with
the Court of First Instance of Davao City.

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A.Y. 2018-2019

On September 16, 1975, the petitioner filed a motion to quash the informations upon the grounds that: (1)
the informations are null and void for want of authority on the part of the State Prosecutor to initiate and
prosecute the said cases; and (2) the trial court has no jurisdiction to take cognizance of the above-entitled
cases in view of his pending protest against the assessment made by the BIR Examiner. 10 However, the
trial court denied the motion on October 22, 1975. 11 Whereupon, the petitioner filed the instant recourse.
As prayed for, a temporary restraining order was issued by the Court, ordering the respondent Judge from
further proceeding with the trial and hearing of Criminal Case Nos. 1960, 1961, 1962, 1963, 1964, and 1965
of the Court of First Instance of Davao, all entitled: "People of the Philippines, plaintiff, versus Quirico
Ungab, accused."

ISSUE:

Whether or not the filing of the criminal complaints against the petitioner were premature since the
Commissioner of Internal Revenue has not yet resolved his protests against the assessment of the
Revenue District Officer; and that he was denied recourse to the Court of Tax Appeals.

HELD:

The contention is without merit. What is involved here is not the collection of taxes where the assessment
of the Commissioner of Internal Revenue may be reviewed by the Court of Tax Appeals, but a criminal
prosecution for violations of the National Internal Revenue Code which is within the cognizance of courts
of first instance. While there can be no civil action to enforce collection before the assessment procedures
provided in the Code have been followed, there is no requirement for the precise computation and
assessment of the tax before there can be a criminal prosecution under the Code.

The contention is made, and is here rejected, that an assessment of the deficiency tax due
is necessary before the taxpayer can be prosecuted criminally for the charges preferred.
The crime is complete when the violator has, as in this case, knowingly and willfully filed
fraudulent returns with intent to evade and defeat a part or all of the tax. 14

An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt

to defeat and evade the income tax. A crime is complete when the violator has knowingly
and willfuly filed a fraudulent return with intent to evade and defeat the tax. The perpetration
of the crime is grounded upon knowledge on the part of the taxpayer that he has made an
inaccurate return, and the government's failure to discover the error and promptly to assess
has no connections with the commission of the crime. 15

Besides, it has been ruled that a petition for reconsideration of an assessment may affect the suspension
of the prescriptive period for the collection of taxes, but not the prescriptive period of a criminal action for
violation of law.16 Obviously, the protest of the petitioner against the assessment of the District Revenue
Officer cannot stop his prosecution for violation of the National Internal Revenue Code. Accordingly, the
respondent Judge did not abuse his discretion in denying the motion to quash filed by the petitioner.